Wednesday, November 18, 2009

The usury of credit cards in Argentina

The Central Bank issued a report with different charges and fees that banks charge for credit cards. Is advised not to "get used to make only the minimum payment, because the interest grows exponentially.

The interest rate charged by banks for financing the balance of the credit cards after making the minimum payment in September averaged 36.5 percent annually, according to the latest survey of the Regime of Central Bank Transparency. However, each entity charged different rates according to the rating assigned to each customer. Thus, the average minimum system stood at 33.1 percent, while the maximum values averaged 39.8 percent. Outside of that average, there are cases of banks reached an exorbitant finance 85.2 per cent annually. Meanwhile, the maintenance costs of the cards range between 6.26 and 9.61 pesos per month. The monetary authority report urges consumers to internalize the levels of interest rates, but also on charges associated with the use and validity of plastic on the outside. The minimum income of 753 pesos were required for local use cards, but we found a high concentration of banks that require up to a thousand.

Banks take advantage of the slight recovery in consumption after a freeze that caused the international crisis to begin an aggressive policy of attracting users who accept their credit cards. The offer includes a wide variety of benefits such as customer retention tool. This ranges from the accumulation of miles on airlines, the amount of points to obtain prizes or discounts and special offers at shops or shows up additional cards at no charge.

But beyond all these advantages, the fees and costs that apply some properties are far from being a "gift". The maintenance of plastics and the financing of balance-which arises from the difference between what you owe and the minimum payment allowed, usually too high. The Central relieves the main items making up that cost and makes available on its website to allow consumers to make a comparison between different products. These include life insurance on balances funded, administrative costs for making and sending the summary, annual renewal costs of plastic and commissions charged for withdrawing cash.

Despite anchoring the lines that offers Central banks to have liquidity, taxes destined for the consumer finance remain historically high, while reluctant to lend long term. In fact, the level of liquidity of the institutions is at its highest. The latest central bank report said that in September the unpaid balance of the financing amounted to summary annual average 36.5 percent. On these values must be added the rate of VAT. However, on a tour of the attached schedule, the report can be seen a wide variety of financial costs, ranging from zero to 85.2 percent.

"Being a credit product, a card has a limit of financing and purchasing, which depends on the credit policy of each entity and the rating assigned to each customer," recalls the report of transparency. In the monthly statement detailing the minimum payment, ie the amount to be canceled to avoid the application of punitive interests. The board of the Fund Kadicard Cooperativa La Plata is the capital of which shows the maximum compensatory higher rate (85.2 percent annually). The same agency, meanwhile, zero-rate financing for consumers with good qualification (minimum fee). The Argencard (Banco Columbia) is the highest rate charged to customers with best rating: 55 percent.

Other variables to consider are the fees charged for exceeding the purchase limit (usually determined according to income level), the cost of additional cards and hiring requirements of the card (income level and maximum age). In this regard, the organizations ask an average minimum income of 753 pesos, while the major amount of deposits banks requested a salary of 2500. In the latter group are located on Credicoop and Santander Rio.

Life insurance on balances funded in September stood at an average of 0.3 percent. You can find issuers of credit cards that charge up to 9.9 per cent annually. Regarding administrative costs, averaged 7.30 pesos. For the minimum values reported, the average was of 6.26 dollars and the maximum amount of 9.61 pesos. In some cases reaches 48 pesos, being the most common major entities between 8.50 and $ 12.50. As average annual renewal costs of 39.09 dollars, but reach 360 pesos.

The Italcred stands at a cost of renewal of its plastics of 282 pesos. No significant differences when comparing the values for consumption in the country with the outside. The report of the Central advises "Do not get used to make only the minimum payment. "If allowed to accumulate in your account balance increased, this will involve greater interests in the future," added the text.